Jason’s New Zealand Investment Story · Part 1

In our previous article, we introduced Kevin and Karen’s planning in relation to property rental and family trusts in New Zealand. In this issue, we turn our focus to Kevin’s cousin — Jason, a successful entrepreneur from China — and explore his investment story in New Zealand.

Considering His Child’s Needs

As a well-known businessman in the construction industry, Jason has operated in his hometown for many years, accumulating extensive experience and considerable wealth. His son, Jasper, is passionate about golf and has been studying in New Zealand for over a year. He enjoys both the school environment and the coaching team here.

Jasper is currently renting an apartment, and Jason is planning to purchase a property for him, so that he can have a more stable and comfortable living environment during his studies. Last month, Jason travelled to New Zealand to visit Jasper and explore potential investment opportunities.

Seeking New Investment Directions

As China’s construction industry enters a period of adjustment, Jason is also looking to explore new investment opportunities in New Zealand. At a gathering, he met Ms Lucy, a construction company owner from East Auckland. They discussed potential collaboration projects, including purchasing land for residential development.

Ms Lucy suggested that Jason could invest in developing several residential properties for sale, while retaining one for Jasper to live in. Jason added with a smile, “It would be even better if this investment could also help me obtain New Zealand residency.”

What Overseas Buyers Need to Know

Jason then came to our law firm for advice. We explained that while overseas persons can invest in New Zealand, all activities must comply with the Overseas Investment Act 2005 (“the Act”). Under the Act, only the following persons are generally permitted to purchase residential property in New Zealand:

• New Zealand citizens;

• Australian and Singaporean citizens purchasing residential property;

• New Zealand residence visa holders, or Australian and Singaporean permanent residents, purchasing residential property, provided that they:

  • Have lived in New Zealand within the past 12 months; and

  • Are New Zealand tax residents; and

  • Have been physically present in New Zealand for at least 183 days in the past 12 months;

• Australian or Singaporean citizens or permanent residents purchasing sensitive residential land with approval from the Overseas Investment Office.

Jason said, “Based on that, neither Jasper nor I are eligible to purchase a house.”

That is correct — unless the property falls within an exemption, overseas persons are generally not allowed to purchase residential property.

Jason then asked, “What if I set up a company to purchase the property — would that be allowed?”

We explained that this is also not permitted. The definition of an “overseas person” includes entities such as companies, trusts, and partnerships. For example, if 25% or more of a company’s ownership or control is held by overseas persons, that company is also treated as an overseas person and is subject to the same restrictions.

What Investments Do Not Require Approval?

Jason then asked, “I have investments in other industries in China — what if I invest in other businesses here? Cafés always seem busy. Or perhaps a motel? When I travel, I notice that motels are often doing well.”

We explained that it is important to understand what constitutes sensitive assets, which include:

• Sensitive land (including residential land, farmland, coastal land, etc.);

• Significant business assets (generally over NZD $100 million);

• Fishing quota.

Overseas persons must obtain approval from the Overseas Investment Office if they:

• Acquire sensitive assets;

• Lease sensitive land for more than 10 years;

• Acquire shares or interests in entities that own sensitive assets (for example, acquiring or increasing shares in a company, partnership, or trust that holds sensitive assets).

We explained that purchasing a café business or a motel business, provided the value is below NZD $100 million and does not involve sensitive land, is generally not regulated under the Act and therefore does not require approval.

We also reminded Jason that failure to comply with the relevant regulations may result in serious consequences, including significant fines or even a court order requiring the disposal of the property.

Jason nodded and said, “Understood. I’ll discuss this further with Ms Lucy and get back to you once there is progress. I also have some questions about immigration policy — let’s discuss that next time.”

(To be continued: Jason’s New Zealand Investment Story · Part 2. Stay tuned.)

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